If the combined income of a man and his wife is about 200,000, how expensive of a house can they afford?
December 10, 2008 · Print This Article
Andrassy asked:
Im only a high school senior now and I really dont ahve a good grasp on real estate. I live in a very upper class town and im just trying to get a feel on how much you have to make to get a certain price house. So say a man and woman combined make 200,000 about how expensive of a house could they afford managebly?
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Im only a high school senior now and I really dont ahve a good grasp on real estate. I live in a very upper class town and im just trying to get a feel on how much you have to make to get a certain price house. So say a man and woman combined make 200,000 about how expensive of a house could they afford managebly?
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Josh Dunaway has been a certfied Realtor in the suburban Chicagoland area for over 20 years. Aside from starting his own real estate company, he also owns a mortgage company as well.
Easy assumptions are this:
Provided they have 20% to put down (which they don’t have to have - but if they make 200k/yr - they should have more than .10 in the bank) and not many other bills AND their credit is good then you can derive an interest rate (in todays market near 6%).
Now, the government recommends that your total obligations to debt should not be more than 40% of your monthly income. So if they don’t have any other debts, they can comfortably afford more house. Now, it will depend on where you live. If you have a 700,000 house assume 1000-1500/month on taxes and insurance - again DEPENDS on where you live. They’ve got about 16.6k/month for normal total expenses. So, IF they have no other debt, they could comfortably afford (again too many assumptions to list at this point) a house that costs somewhere around 16.6k*.4= 6.66k - 1000 (tax&ins) = 5.66k for principal and interest. They can afford comfortably a mortgage of around 700k.
Now it really comes down to how far you want/need to push yourself. If you live in LA or New York or San Francisco - you are buying a small avg. home - if you are in Nowhere, FL - you can buy a small castle.
Hope some of that helps.
Post more if you want to know more!
Joe…
if theyd been saving money on a regular basis for a few years or more, they could afford a really big house. definately one in an upper class town. i bet they could afford something that qualifies as a mini mansion. they could afford something that costs 400,000- 500,000 or more, since they make so much, they could get any type of loan to make up any difference in price. (200,000- wow, lucky)
Depends on what they consider affordable. My husband & I both work & make good money, but we try to only live on one income & put the rest in the bank. We could afford a more expensive house, but we choose not to. It is important to us not to live paycheck to paycheck. That being said…I would guess you could buy a $350,000 to $400,000. It depends on wear you live. In some places 400,000 houses are top quality other, boarder line slums. You need to consider what kind of life style you want, what are your future goals like retirement, paying bills off early. 200,000 would probably be a nice lifestyle.
I would say 500,000. Best thing to do is get pre-qualified with your bank, or in your case just go to a bank and tell them your situation. You could use lendingtree.com or google “home loans” and apply for a loan. Be careful who you give personal information to.
It is a good thing you are thinking about your future. Now take the next step. Go to the bank and ask. The worst that could happen is you will catch them at a busy time of day and they could get angry. I take that back, the worst thing that could happen is they will give a politically correct answer that means nothing.
You are very right. Many things in life are not taught in school. How to balance a check book, pay for a mortgage. The only way to know is to venture out from the protection of your family and ask.
wow, that’s a complex question. afford is a relative term.
It depends on:
1. How much debt do they have
2. How many kids do they have
3. How many toys do they want (boat? RV? etc)
4. How much do they spend on private schools, fancy clothes, travel, etc.
but they’ll if they don’t have any other debt, and they can handle the risk of an interest only loan, and they can stand having 50% of their income go to to their housing expense, and they have good enough credit to get 7% interest rate or better, they’ll be able to get a loan for about 1.15 MM…but it will be tight. (payments would be at least 6708/mo + taxes, insurance, hoa fees etc…)
What they can afford or manage mainly depend on them.The question is how much of a mortgage payment do they want to pay monthly.$200,000 is a very nice income bracket. Their monthly expenses should determine what kind of mortgage payment they want so it depends on what they bring home monthly. Another factor would be their credit the better your credit, the lower the interest rate, the lower their mortgage payment will be. My house is about $400,000 and my payment is $2000 monthly (taxes and insurance included) I have a 15 year fixed interest rate of 6.75% with a 712 credit score. The average person scores are about 620 with the interest rates now and a $400,000 house the interest rate would be at about 8.00% or higher and the monthly payment would probably be about$3800 dollars a month so the lower the credit, the higher the interest rate, the more the mortgage payment will be.